"In relation to political relationships, the following is true, except:"

		Political cost hypothesis: Managers of larger entities are more likely to prefer accounting policies that reduce profit.
		Political cost hypothesis: Managers of larger entities are more likely to prefer accounting policies that increase profit.
		"Lobby groups often target larger, more profitable firms."
		Political costs refer to wealth transfers imposed on an entity e.g. the government may impose a new tax on businesses in a particular industry.

"In relation to the Risk Aversion problem in owner-manager relationships, the following is true, except:"

		Arises because of different risk appetites between managers and owners.
		Managers will tend to invest in projects with higher risk than shareholders would like for the business.
		Shareholders can readily diversify their risk through portfolio management.
		"Managers, who have undiversified human capital, may be more risk averse than shareholders. "